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A direct cost is a cost than can be attributed directly to a product; examples include materials used in production, electricity used by a machine making the product, worker hours spend operating the machine to make the product.
An indirect cost is a cost than occurs but cannot be attributed directly to a product; examples include electricity used by lighting, the account staff wages, business rates.
indirect costs, like direct costs can be both fixed and variable: business rates are fixed (for a year) but the cost of electricity used to light the factory floor is going to be variable depending upon how much the machines are used and staff being present - there can also be more than one product being made on the factory floor on different machines, but only one set of lights over the whole floor - one light could easily cover 2, 3 or more machines.
Wiki User
∙ 8y ago
Wiki User
∙ 9y agodirect cost is that cost which is separately identifiable and allocatable to production volume like direct material or direct labor while all other cost which is not separately identifiable is indirect cost like overheads.
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Variable cost can always be traced directly to the cost object?
No, because varible cost can be direct or indirect cost. Direct cost can always be traced directly to a cost object, but not indirect cost. For example, sales commission.
What are the advantages of using normal costing?
direct prod cost: you know what the real cost will be indirect costs: still and estimate on how to spread cost but real base of total indirect costs to start from
what are factor that affecting the classification of a cost as direct or indirect?
The classification of a cost as direct or indirect depends on a variety of factors. Traceability: The most important factor in determining whether a cost is considered direct or indirect is the ability to trace it to the production process. Direct costs are those which can be directly traced to the production of goods or services, while indirect costs are those which cannot be traced in this way. Timing: The timing of the cost can also be a factor in determining whether it is classified as direct or indirect. Costs which are incurred before production begins are generally classified as indirect, while those incurred during the production process are typically direct. Relationship to Production Process: The relationship of the cost to the production process can also be a factor in determining whether it is considered direct or indirect. Direct costs are those which are related to the materials or labor used in the production process, while indirect costs are those which are necessary but not directly related to the production process. Controllability: Another factor in the classification of a cost as direct or indirect is the degree of control that the company has over the cost. Direct costs are those which are controllable by the company, while indirect costs are those which are uncontrollable and fixed. Flexibility: The flexibility of the cost can also be a factor in determining whether it is classified as direct or indirect. Direct costs are those which can be adjusted in response to changes in production, while indirect costs are those which remain fixed regardless of changes in production.
Can Raw materials be direct or indirect?
raw material are indirect material
How does one work out the cost of a product in detail?
One uses absorption costing taking into account direct and indirect materials labour and overhead.
Difference between direct cost and indirect cost?
direct cost has direct relation with product manufacturing while indirect cost not and not identifiable with cost as well.
Can direct cost be indirect cost?
The Answer is NO. Direct costs are direct cost which can be clearly/economicaly identified with the cost object, indirect costs cannot be traced to a specific cost object, based on the definition direct cos cant be an indirect cost (Misdhaaque Ahmed)
Prime cost and conversion cost?
Prime cost = direct materials + direct laborwhile conversion cost = direct labor + factory overhead( which includes indirect materials, indirect labor and other indirect costs
Is advertising expense direct or indirect cost?
indirect
What are the differences between direct cost and indirect cost in management accounting.?
what are the differences between direct cost and indirect cost in financial accounting
Can cost function measure direct cost as well as indirect cost?
yes cost function measures the direct costs along with indirect cost.
Is direct cost same to indirect cost?
No direct costs and indirect costs are not same and opposite of each other.
Define direct and indirect labor cost in garment industry?
Define direct and indirect labour?"
When do you say direct and indirect?
Hereunder several example of the employ of "direct" as an adjective: direct consequence, direct descendant, direct action, direct discourse or speech (British), direct evidence, direct cost. You can also use it to mean: frank, open, sincere; a direct answer, a direct way of doing things. "Direct" as an adverb: I shall write to you direct, the train goes direct to Boston . Several examples of the employ of "indirect" as an adjective: an indirect route, to make an indirect reference, to answer a question in an indirect way, indirect cost, indirect object, indirect discourse or speech (British).
Is direct material a selling cost?
is direct cost a? Selling cost, manufacturing costs, direct, manufacturing cost indirect, general and administrative cost, fixed cost , variable cost, is direct cost a? Selling cost, manufacturing costs, direct, manufacturing cost indirect, general and administrative cost, fixed cost , variable cost,
Flour for baking bread are direct or indirect cost?
They are direct costs.
Direct costing as a technique of costing?
direct costing is a technique in which costs are classified as direct cost or indirect cost.
